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Vitalik Buterin had a thought-provoking tweet a few days back about interest rates. Lending DAI to Compound offers 11.5% annual interest. US 10 year treasuries offer 1.5%. Why the discrepancy? — Vitalik Non-giver of Ether (@VitalikButerin) August 23, 2019 Today's post explores what goes into determining interest rates, not blockchain stuff. So for those who don't follow the blockchain world, let me get you up to speed by decoding some of the technical-ese in Buterin's tweet. DAI is a version of the U.S. dollar. There are many versions of the dollar. The Fed issues both a paper and an electronic version, Wells Fargo issues its own account-based version, and PayPal does too. But whereas Wells Fargo and PayPal dollars are digital entries in company databases, and Fed paper dollars are circulating bearer notes, DAI is encoded on the Ethereum blockchain. Buterin points out that DAI owners can lend out their U.S. dollar lookalikes on Compound , a lending protocol based on Ethere...

Source: Gravity Glue (2014) Cryptocurrencies were supposed to destroy the traditional monetary system. Ten years on, where are we? Bitcoin has been wildly successful, but as a financial game --not as a medium of exchange. It's a fun (and potentially profitable) way to gamble on what Keynes once described as what "average opinion expects the average opinion to be." But no one really uses it to pay for stuff. It's nature as a gambling token makes it too awkward to serve as a true substitute for banknotes and credit cards. A number of stablecoins have emerged over the last five or six years. (I first wrote about stablecoins four years ago). Like bitcoin, stablecoins exist on a blockchain. But unlike bitcoin, these tokens have a mechanism for ensuring their stability. Stablecoin owners can convert tokens at par into underlying dollar balances maintained in the issuer's account at a regular bank. So stablecoin entrepreneur have basically built a new blockchain layer...